Mosaic told the New Zealand and Australian Exchanges today Waggamba-2 had encountered oil and gas within the Tinowon sandstones over the interval 2616 - 2626m.

Mosaic said the decision was made not to drill into lower sands, given the operational difficulties of the weekend due to high drill hole pressures. Total depth of the well was now 2626m and the well had been suspended as a potential oil-gas producer.

It is not possible to flow test through chokes at the present time, due to the need to mobilise further equipment at the drill site. Proper testing with tanks on-site would be done as soon as possible.

"The data we have from this well is consistent with the evidence from the nearby 1981 well that indicated the field extends outside of structural closure and belonged to a larger system much like the Churchie-Myall Creek system to the north,” said Mosaic chief executive Howard Brady.

"We now plan testing and seismic to fully delineate the structure and depending on Government approvals, we plan to have the Waggamba pipeline in place within the next 12 months".

The Production Licence Application (APL 202 - 91sq km) and the pipeline application (23km) have already been lodged.